Question

You receive a $20,000 5-year constant amortization loan (CAL). The loan's annual interest rate is 10%. What is the total payment in year 4, rounded to the nearest dollar?

Answer 1

Total payment per year would be same .
Annual payment is caculated as below.
Annual Payment = [P x R x (1+R)^N]/[(1+R)^N-1]
Where,
P= Loan Amount
R= Interest rate per period
N= Number of periods
= [ $20000x0.1 x (1+0.1)^5]/[(1+0.1)^5 -1]
= [ $2000( 1.1 )^5] / [(1.1 )^5 -1
=$5275.95
Payment for year 4 = $5276